How Good Are the New Jobs?

Economic pessimists have changed their
tune. After years of trumpeting a "jobless recovery," the skeptics
are admitting that America is in the midst of a jobs boom, with 1.4
million new jobs over nine straight months of payroll growth. Now
the pessimists insist that the new jobs are no good.

But
if the jobs being created are not any good, what is? Since January
2001, American incomes have risen by 7.5 percent, wages have risen
by 2.4 percent, and the government projects 21 million good job
opportunities over the 2002-2012 decade.1

The
charge that low-quality service jobs--often dubbed "McJobs"--are
proliferating is inaccurate. The McJobs argument has two primary
implications. The first is that wages are declining, and the second
is that the new jobs are unfulfilling. Empirical data on American
pay, incomes, and quality of life make the case that American jobs
are better today and getting better every year.

Yet
the real story is not in the spinning political duel over data, but
in a much broader understanding of the new economy. Put simply, the
modern workplace is empowering individuals to work for themselves,
enjoy flexible hours, and pursue dreams rather than survival, all
while shattering the traditional definitions of employment.

Highlights

Average real earnings for "production and
nonsupervisory" workers are 2.4 percent higher today than in
January 2001.

The vast majority of U.S. jobs are in
service sectors (83.3 percent), and most future growth will be in
the health, education, retail, and technology subsectors.

There will be zero growth in
"burger-flipper jobs" relative to the overall labor force,
according to U.S. Department of Labor projections for
2002-2012.

Argument #1: American Pay is Higher Today
Than During the Dot-Com Boom

Multiple indicators show big pay gains in
recent years. Real disposable income per capita is 7.5 percent
higher than it was in January 2001. Annual real income per
capita--a broader measure of quality of life--is up 5.2 percent
($1,819) in the United States over the same period. That is real
money, after inflation, that would pay for an extra 900 gallons of
gas for every American.

In
May, average hourly earnings rose by 0.3 percent, but prices of
consumer goods rose by even more, meaning that real earnings
declined by 0.4 percent. This decline was driven mainly by the
spike in gasoline prices, which is already fading.2

Real
hourly earnings are up by 1.61 percent since March 2001, when the
recession began; up 2.37 percent since President George W. Bush was
inaugurated; and up 8.87 percent over the past 10 years. One
advantage of earnings data is that they count only "production or
nonsupervisory jobs," so they are not skewed by rich incomes, but
the downside is that they are also limited to traditional payroll
jobs since the source is the Current Employment Statistics (CES)
survey.

The
CES, commonly known as the payroll survey, completely neglects the
increasing number of Americans who work for themselves and has also
suffered from an illusion of joblessness in 2001-2003 due to
declining job turnover. Indeed, the explanatory note accompanying
the monthly "Real Earnings" reports notes that many factors "tend
to result in weekly earnings averages significantly lower than
corresponding numbers" partly caused by "turnover and layoffs." The
point is that, regardless of which statistics--even non-inclusive
CES figures--one uses, American jobs are higher-paying now than
they were during the dot-com boom or, more technically, the
pre-recession peak of the first quarter of 2001.

Argument #2: New Jobs Are Quality
Jobs

The
number of payroll jobs has increased for nine straight months
according to the CES, especially in the service-providing sector.
In May, service businesses paid 109.3 million--or 83.3 percent--of
all 131.2 million paychecks, including millions of doctors, nurses,
and teachers. What the payrolls ignore are the extra 7.55 million
non-payroll American workers counted in the Census Bureau's monthly
household survey. Should these non-payroll workers be considered
underpaid or unsatisfied? Probably not. National polls routinely
report that one of the most popular aspirations of Americans is to
be their own boss.

It
would also be an error to imagine that labor data are being
interpreted along partisan lines. Thoughtful Democrats and
Republicans agree that the emergence of a new workforce is a net
positive, while protectionists of both parties dislike change.
Daniel Pink, who once worked as Al Gore's speechwriter, is a good
example of a thoughtful Democrat. Pink's book Free Agent Nation
goes into great detail in discussing and celebrating
self-employment and microbusinesses.

Pink
argues that several factors, including improvements in information
technology, are driving a "broad shift in power from the
organization to the individual"3 in America. Data from the household
survey of employment reflect this rapid change, even though the
survey's vague definition of "self-employed" suggests that this
number may be a significant underestimate.

"Do You Want Fries with That?"

A
common joke about the future is that all our kids will be
burger-flippers--a joke that plays on misinformed fears that most
jobs in the service industry are low-skilled. Services include
teachers, artists, athletes, and even cooks. Every economy in
history is based on trade and consumption, with merchant retailers
who operate the "invisible hand" of commerce. In modern America,
they are sales staff in shopping malls, gourmet chefs, and Home
Depot shelf stockers.

In
2002, there were almost 3 million "chefs, cooks, and food
preparation workers" in the U.S. The spring 2004 Occupational
Outlook Quarterly anticipates 12 percent growth in food-related
work in the decade ahead. The real joke here is that 12 percent is
exactly the projected growth rate of the overall labor force as
well.4 That means
there will be literally zero growth in "burger-flipper jobs"
relative to the overall labor force.

The Future of American Employment

The
Occupational Outlook Quarterly also indicates that future jobs will
be concentrated predominantly in health, education, retail, and
computers. Registered nurses earn a median salary of $48,090 and
are projected to add an astounding 110,119 gross job openings per
year.5 Furthermore,
health care jobs comprise one-half of the 20 occupations that are
projected to grow the fastest in the 2002-2012 decade. Computer
occupations account for another five.6

Critics will assert that America is losing
the best positions. However, according to official projections, the
top occupations in numerical decline are farmers and ranchers,
sewing machine operators, typists, and stock clerks7--not IT workers, not
scientists, and not the highest-paying professions.

Making projections about future employment
is inherently uncertain, mainly because the fast pace of
technological and social change means that there will be new
occupations in 10 years that are simply beyond today's imagination.
The Labor Department's best guesses for the fastest-growing
occupations are displayed in Chart 1.

Such projections can be misinterpreted in two ways. Rapid growth in
low-skill jobs means higher demand and therefore higher pay for the
poorest Americans, but it can be interpreted by pessimists as bad
news because the current pay for those jobs is below average.
Likewise, if high-skill jobs are expected to surge, skeptics will
say the poor are being left behind.

However, such pessimism should be
considered in light of three basic facts. First, U.S. employment is
expected to surge in all sectors and by 21.3 million overall. Thus,
far more occupations will be expanding than contracting. Second,
the U.S. will experience a demographic shift as the baby boomers
retire, inevitably driving up pay for future workers as demand for
labor outstrips supply. Third, the future will not be dominated by
high-tech brain jobs--a common misperception.

Everyone knows of the financial rewards
that favor people with high intelligence, education, and skills.
However, in American society, there is a second, deeper trend
toward personal, face-to-face employment. Not everyone needs a
Ph.D. to do well in the future. Physical therapists, personal
tutors, and gardeners are examples of growing occupations that are
high-skill but not necessarily high-education. It is easy to
imagine an America where all senior citizens are well-cared for,
all workers are coached to succeed, and all children are nurtured
by personalized educators. Personal attention is a key trend in the
future, and therefore in the workforce.

The Outsourcing Ghost Story

The
facts on job creation fly in the face of ghost stories about
outsourcing America's jobs overseas. So far, the debate over
outsourcing has been dominated by a questionable study from
Forrester Research, which projects that 3.4 million service jobs
will be offshored during 2000-2015. While Senator John Kerry (D-MA)
and political pessimists of both parties have repeatedly quoted the
study, they do not tell audiences that the lead author of
Forrester's study was also a keynote speaker at a Forrester "boot
camp" in Dallas on June 22-23 who "walk[ed] participants through
all the components of creating and executing on taking IT services
offshore."8

The
Forrester estimates of outsourced jobs are not so much wrong as
one-sided. One-sided views of global economics implicitly assume a
zero-sum employment market and misleadingly ignore all the gains in
efficiency.

An
example of outsourcing in terms of domestic automobile
manufacturing illustrates this flaw. The Forrester perspective is
that every new car job that was created in 1920s Detroit meant
fewer net jobs in California. However, California did fairly well
by specializing in movies, higher education, and automobile
design.

There are only two definitive studies of
outsourcing. The first comes from Global Insight, a mainstream
macroeconomic modeling firm, which found that every job offshored
led to efficiencies and lower prices that created two more jobs at
home. However, the real watershed was a Labor Department survey of
layoffs of 50 or more employees, published on June 10. The Labor
Department reports that offshoring amounted to a mere 4,633 jobs in
the first quarter of 2004, or less than 2 percent of the natural
flow of jobs lost.9

Conclusion

Congress has a choice: to believe the
ghost stories about employment in America, which have always been
popular but never come true, or to continue the American tradition
of freedom in trade and investment. If Congress arrogates to itself
the power to tell American companies how to operate (to save jobs,
set wages, and account stock options), then it follows a well-worn
path of socialist failure.

Managed capitalism is an oxymoron.
Basically, Congress can choose to protect the jobs of the past or
prepare Americans for the jobs of the future. It should be an easy
choice.

Tim Kane,
Ph.D., is Research Fellow in Macroeconomics in the Center
for Data Analysis at The Heritage Foundation. Jon Casale served as
the research assistant in preparing this report.

Share

America is enjoying a jobs boom, with 1.4 million new jobs overnine straight months of payroll growth, but the real story lies ina much broader understanding of the new economy: The modernworkplace is empowering individuals to work for themselves, enjoyflexible hours, and pursue dreams rather than survival, all whileshattering the traditional definitions of employment.

Rep. Peter Roskam (R-IL) says it's "a great way to start the day for any conservative who wants to get America back on track."

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